Credit report errors can cost you

Pull your credit reports to check for mistakes.

February 16, 2013|Paul Muschick | The Watchdog

A young Poconos man nearly was in tears when we talked about his credit reports.

He said his father's medical debts mistakenly were showing up on his reports, and no matter how hard he tried, he couldn't get them removed. He was trying to get loans to attend college, but his messy, mistaken credit history was complicating things.

That was several years ago. I made some phone calls to investigate, but then lost contact with him, so I'm not sure whether he ever straightened things out.

But I know he's not alone in struggling with this issue.

For years, there has been debate about the accuracy of credit reports and how errors affect people. Consumer advocates contend mistakes happen too often. The industry says they aren't common, and even when they occur, they don't always cost consumers in the form of denied or higher-interest credit.

It found errors weren't scarce, with about 26 percent of people finding them on their reports. But it also found only about 5 percent of study participants had errors on their reports that were likely to damage their credit score to the point where they'd pay more for things like loans and insurance.

So both sides found something in the government's research to bolster their arguments and claim victory.

What I took from the study is that regardless of how often it happens, innocent people do lose.

Your only defense is to screen your credit reports from the three major agencies — Experian, Equifax and TransUnion. You can get them for free annually by phone (877-322-8228) or online (www.annualcreditreport.com). There's no reason not to do it, yet only about 20 percent of people do, according to the Consumer Financial Protection Bureau.

If you find a mistake, dispute it promptly and don't give up if your claim is ignored or rejected.

"Disputing errors is also easier than many people think with today's online features," Nessa Feddis, a senior vice president at the American Bankers Association, said in a statement about last week's report.

The Federal Trade Commission followed 1,001 people as they obtained their credit reports from the three major agencies, checked them for accuracy and disputed errors. The study tracked how participants' credit scores changed as a result, and how that affected their access to credit and the interest rates they would be offered.

"Overall, the results of the study suggest that while a notable number of consumers may have inaccuracies on their credit reports … the impact of these errors on credit scores is generally modest … and often there is no change in the credit score," the FTC concluded. "For a few consumers, however, the impact is large."

The agency said its findings exceeded the credit reporting industry's previous estimates about how often credit scores changed after disputed reports were corrected.

"The FTC's findings are no surprise," Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group, said in a statement. "We've criticized the credit reporting industry for decades over unacceptable levels of seriously damaging mistakes, many of which are preventable."

The Consumer Data Industry Association, which represents the credit reporting agencies, said the study bolstered its position that costly errors are rare, as only about 2 percent of the nearly 3,000 reports studied had an error that would lead to consumers paying more for credit.

The association said the government's research found that 88 percent of errors were the result of lenders and other sources providing inaccurate information to the national credit bureaus.

"This additional study from the U.S. government's chief consumer protection agency should reassure consumers that they can depend upon the accuracy of their credit history," association President and CEO Stuart Pratt said in a statement.

I pulled my reports last week. You should follow my lead. If you find mistakes, let me know how the dispute process goes.

My reports looked accurate, but I only was able to review two of the three. The TransUnion website locked up on me before I could read and print my report. I rebooted and tried to access it again, but I was told I'd already had my free report for the year. That's a crock. Your report should remain available for at least 24 hours to account for glitches like that.

Check my blog at http://blogs.mcall.com/watchdog for the FTC report and more on what people are saying about it.

The Watchdog is published Thursdays and Sundays. Contact me by email at watchdog@mcall.com, by phone at 610-841-2364 (ADOG), by fax at 610-820-6693, or by mail at The Morning Call, 101 N. Sixth St., Allentown, PA, 18101. Follow me on Twitter at mcwatchdog and on Facebook at Morning Call Watchdog.

CREDIT REPORT ACCURACY

The Federal Trade Commission studied 1,001 people and their 2,968 credit reports.